Shareholders who have questions about the proposed acquisition by RCF can contact NorZinc Ltd.’s strategic advisor and proxy solicitation agent Laurel Hill Advisory Group at 1-877-452-7184 or by e-mail at email@example.com.
NorZinc Ltd. (TSX: NZC) (OTCQB: NORZF) announced that, based on the unanimous recommendation of an independent special committee of its board of directors as well as unanimous approval by the Board, it has entered into an arrangement agreement with RCF VI CAD LLC in respect of a transaction whereby RCF will acquire all of the issued and outstanding common shares of the Company that RCF and its affiliates do not currently own pursuant to a court-approved plan of arrangement for $0.0325 in cash per NorZinc share, which represents a 3.5% premium to the 45-day VWAP of $0.0314 per share. RCF and its affiliates currently hold approximately 48.31% of the outstanding common shares of the Company.
Concurrently with signing of the Arrangement Agreement, NorZinc and RCF have amended and restated the credit facility dated May 19, 2022, to provide for an increase in the commitment thereunder by US$11 million.
Rohan Hazelton, President & CEO, NorZinc stated, “The Company has been working to address challenges with respect to its debt situation and capital funding needs given the current market conditions. Considering the interests of all stakeholders in the Company and its Prairie Creek Project, and in order to maintain the current development work at and accessing the site, The Board has explored all viable strategic alternatives. Ultimately, it has concluded that the unsolicited all-cash offer to the minority shareholders contained within the Arrangement Agreement is in the best interests of the Company and its stakeholders. While we believe this asset has an exciting future, given the current capital markets, debt and equity position of the Company, we believe this is the best alternative for the Company and its shareholders at the present time. We are proud of the recent milestones achieved in permitting and indigenous community agreements that have advanced Prairie Creek development and remain bullish on the long-term viability of the Project and the positive impact it will have on the local region.”
Highlights of the Transaction
The Special Committee and the Board considered the Transaction with reference to the best interests of the Company, its stakeholders, ongoing project development, as well as its prospects, strategic alternatives and competitive position, including the risks involved in achieving those prospects and pursuing those alternatives in light of current market conditions and the Company’s financial position.
The Special Committee and Board recommend the Transaction to securityholders based on a number of reasons, including, among others:
The full background to the transaction and reasons for the recommendations of the Special Committee and Board will be set out in the information circular in connection with the meeting to consider the Transaction. The Special Committee and Board strongly recommend that securityholders read and consider the full text of the circular when it is provided to them.
The Transaction is to be affected by way of a court-approved plan of arrangement under the Business Corporations Act (British Columbia). The consummation of the Transaction is subject to a number of conditions customary to transactions of this nature, including, among others, the adoption of a resolution approving the Transaction at a special meeting of securityholders of the Company by: (i) at least 66⅔% of votes cast by the Company’s shareholders present in person or represented by proxy at the Meeting; (ii) at least 66⅔% of votes cast by the Company’s shareholders and holders of options, warrants, deferred share units and restricted share units, voting together as a single class, present in person or represented by proxy at the Meeting; and (iii) a majority of the votes cast by the Company’s shareholders present in person or represented by proxy at the Meeting, excluding votes attached to NorZinc common shares held by RCF and its affiliates and any other person as required under Multilateral Instrument 61-101 – Protection of Minority security Holders in Special Transactions.
The Company expects to hold the Meeting as early as possible in the fourth quarter of 2022 and the Transaction is expected to close shortly thereafter, subject to court approvals and other customary closing conditions.
In addition to Securityholder and court approvals, the Transaction is subject to applicable regulatory approvals including, but not limited to, Toronto Stock Exchange approval. The Arrangement Agreement contains customary provisions including non-solicitation, “fiduciary out” and “right to match” provisions, as well as a US$250,000 termination fee payable to RCF under certain circumstances. Further details regarding the terms and conditions of the Transaction are set out in the Arrangement Agreement, which will be publicly filed by the Company under its SEDAR profile at www.sedar.com. Additional information regarding the terms of the Arrangement Agreement, the background of the Transaction and the independent valuation and fairness opinions will be provided in the information circular for the Meeting, which will also be filed on the Company’s SEDAR profile at www.sedar.com.
Special Committee and Board Approval
The Special Committee was established by the Board to consider the Transaction, as well as other alternatives available to the Company and, if it deemed advisable, negotiate with RCF. Following a comprehensive evaluation of the Transaction and extensive negotiations between the Special Committee and RCF on price and other terms of the Transaction, including amendments to the credit facility dated May 19, 2022, between the Company and RCF to address the Company’s near-term liquidity while the Transaction is pending, the Special Committee unanimously recommended that the Board approve the Transaction. The Board (excluding conflicted directors), having received the unanimous recommendation of the Special Committee, unanimously determined that the Transaction is in the best interests of NorZinc and is fair to the shareholders of NorZinc other than RCF and its affiliates and recommends that Securityholders vote in favour of the Transaction at the Meeting.
Formal Valuation and Fairness Opinions
In connection with its review of the Transaction, the Special Committee retained National Bank to prepare a formal valuation in accordance with MI 61-101. National Bank delivered an oral opinion to the Special Committee that, as of September 29, 2022, and based on National Bank’s analysis and subject to the assumptions, limitations and qualifications to be set forth in National Bank’s written valuation, the fair market value of the common shares of the Company is in the range of $0.03 to $0.07 per common share. National Bank also delivered an oral opinion to the Special Committee that, as of September 29, 2022, and subject to the assumptions, limitations and qualifications to be set forth in National Bank’s written fairness opinion, the consideration to be received by the Minority Shareholders is fair, from a financial point of view, to such Minority Shareholders.
The Board retained Scotiabank as its financial advisor in connection with its review of the Transaction. Scotiabank delivered an oral opinion to the Board that, as at September 29, 2022 and subject to the assumptions, limitations and qualifications to be set forth in Scotiabank’s written fairness opinion, the consideration to be received by the Minority Shareholders pursuant to the Transaction is fair, from a financial point of view, to such Minority Shareholders.
Amended and Restated Credit Agreement
Concurrently with entering into the Arrangement Agreement, RCF and the Company entered into the Amended and Restated Credit Agreement to provide for an increase in the commitment thereunder by US$11 million in order to address the Company’s near-term liquidity needs while the Transaction is pending. The primary amendments include:
The Amended and Restated contains customary negative pledges, and certain conditions including the completed Rights Offering, if requested by RCF, and certain other conditions. The first drawdown with respect to the additional loan amount of US$11 million is planned to occur upon receipt of approval of the loan from the TSX.
Voting and Support Agreements
All directors and senior officers of the Company have entered into voting and support agreements to vote their securities in favour of the Transaction, subject to certain customary exceptions.
National Bank is acting as financial advisor to the Special Committee of NorZinc and Bennett Jones LLP is acting as legal counsel to the Special Committee.
Scotiabank is acting as financial advisor to NorZinc and DuMoulin Black LLP is acting as Canadian legal counsel to NorZinc.
Bacchus Capital Advisers is acting as financial advisor to RCF and Blake, Cassels & Graydon LLP is acting as legal counsel to RCF.
NorZinc is a TSX-listed mine development Company trading under the symbol “NZC” and on the OTCQB under the symbol “NORZF”. NorZinc is focused on developing its 100%-owned high-grade zinc-silver-lead Prairie Creek Project, located in the Northwest Territories.
NorZinc shareholders who have questions about the Transaction can contact NorZinc’s strategic advisor and proxy solicitation agent:
Laurel Hill Advisory Group
North American Toll Free: 1-877-452-7184 (or 416-304-0211 for shareholders outside North America)
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We acknowledge the [financial] support of the Government of Canada.